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Finally, the day for the opening ceremony of the 2018 FIFA World Cup, Russia is knocking on the door. The tournament will be held from Jun 14 to Jul 15 in 11 cities in Russia. Investors will now try to weigh Russian investing options, as such events mean a lot for the economy of the hosting country.

This is especially true given the country’s struggling politico-economic scenario. In April, the country has been slammed with a new round of U.S. sanctions in connection with a chemical attack in Syria and interfering in the 2016 elections. However, those sanctions did not seem to be a widespread one (read: Russia ETFs Hit by Sanctions and Syria Attack).

What is the Current Condition of the Russian Economy?

Russia's economy expanded 1.3% year over year in the first quarter of 2018, after a 0.9% expansion in the prior period, per a preliminary estimate. It marked the six consecutive quarters of growth after two years of contraction.

While the economy is making a comeback, possibilities of a rise in interest rates in the United States may dampen the lure of this emerging market and can cause an exodus of foreign investments.

Against this backdrop, many are taking a closer look at one of the pillars of the BRIC nations on account of World Cup Football 2018, which is supposed to make a substantial contribution to this economy.

Earlier hosts have fetched a short-term economic lift, with Japan and South Korea amassing $9 billion from the tournament in 2002, Germany accumulating $12 billion in 2006, and South Africa earning about $5 billion in 2010, per the source.

Inside the Tailwind of Hosting World Cup

Economic boosts should come in the form of more temporary job creations, higher demand for consumer products and services, a boost in tourism and increased investments in infrastructure.

Russia’s deputy prime minister, Arkady Dvorkovich, expects the tournament to feed about $30 billion to the economy, much higher the $11 billion cost incurred. Dvorkovich added that the planned tournament has already contributed about 1% to annual GDP over the past five years.

McKinsey consultancy services expects the total impact of the event to reach around $15 billion on the country's GDP, "which exceeds the impact of similar championships in Brazil, South Africa, Germany and South Korea, and is second only to the result of Japan."

But investors should note that this $15 billion represents only 0.2% (estimated by the rating agency Moody's) of Russia's annual output. The Central Bank of Russia too believes that the tournament is likely to enhance the country’s annual GDP in Q2 and Q3 by 0.2% and lower inflation to a record-low of around 2% in the ongoing quarter.

Bottom Line

All in all, a short-term boost can be expected from the tournament though things do not look that rosy over the long term. Over the long run, the movements of the U.S. dollar and oil price have more to do with Russia investing (read: Should You Buy EM ETFs Despite Trade War & Other Concerns?).

Notably, the World Bank recently cut its forecast for Russia’s economic growth for 2018 to 1.5% from 1.7% and cautioned that Russia may see more years of moderate economic outlook.

ETFs in Focus

Whatever the case, investors might want to have a look at the Russia ETFs during World Cup. These funds are VanEck Vectors Russia ETF (RSX - Free Report) and iShares MSCI Russia ETF (ERUS - Free Report) . The funds shed in the range of 3.4% to 3.7% in the five days (as of Jun 11, 2018) (see Broad Emerging Market ETFs here).

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